AGENCIES, Hong Kong: China’s direct investment in the US fell in 2019 to its lowest level since the Great Recession, even before the coronavirus pandemic shut down much of global commerce.
In quantitative terms, investment between the US and China tumbled to a nine-year low in the first half of 2020, hit by bilateral tensions that could see more Chinese companies come under pressure to divest US operations, a research report said.
Investment, both direct investment by companies and venture capital flows, between the two countries fell 16.2% to $10.9 billion in January-June from the same period a year earlier also hurt by the coronavirus pandemic, according to figures from consultancy Rhodium Group and the National Committee on US-China Relations, an NGO.
Direct investment includes mergers, acquisitions and investments in things like offices and factories but not financial investments like purchases of stocks and bonds. That’s a far cry from half-yearly totals of nearly $40 billion seen in 2016 and 2017.
Flows are unlikely to recover this year, regardless of the outcome of the US presidential election, the report said, as “systemic concerns driving caution on Chinese investment in high technology, critical infrastructure and personal assets will not subside.”
Citing national security risks posed by Chinese technology firms, US President Donald Trump’s administration has sharply expanded actions to hobble Chinese companies.
US regulators under Trump are worried that China will gain access to sensitive American technology, have been taking a harder look at Chinese investment in the United States, a shift mandated by a 2018 law.
This has included putting telecoms giant Huawei Technologies Co Ltd on its trade blacklist, threatening similar action for Semiconductor Manufacturing International Corp and ordering TikTok owner ByteDance to divest the short-form video app.
“At a time of rising discomfort with US-China technology integration numerous other companies – both Chinese firms operating in the US and US firms with a presence in China may be forced to divest,” the report said.
It added that the US treatment of ByteDance and the broader shift away from US-China technology integration may lead to policies which make it more difficult for US tech firms to operate in China.
Investment by US firms in China in the first half tumbled 31% to $4.1 billion, while investment by Chinese companies in the United States rose 38% to $4.7 billion, the report said. That was mostly due to one deal — a Tencent Music -led consortium’s purchase of a minority stake in Universal Music group for $3.4 billion.